Author: coinpal

I often discover on almost a daily basis how elementary my knowledge of cryptocurrency is. Even though I have been in this space for over 4 years I am still learning new things every day, somethings which I have trouble understanding. Lightning Network is one of those things, and as it pertains to Bitcoin, it is actually a huge deal. Therefore I will do my best to pass on what I understand and further provide some resources that break down the concept better than I currently can.

Lightning Network is a scaling solution for blockchains, not just for Bitcoins’ Blockchain. It allows the creation of ‘payment channels’ that allow multiple parties to perform transactions with each other and then to settle those transactions on a blockchain. Aka 2 or more parties could have thousands of transactions and settle the entire exchange with 1 transaction on the blockchain, therefore greatly reducing the amount of transactions needed to be secured within blocks.

This means that the current limit of roughly 7 transactions a second, that Bitcoin allows, could theoretically allow for an exponential amount of transactions using lightning to still be verified in a secure manor without bloating the chain. Think making trades with a friend for days or weeks and then settling all those transactions at once on a secure ledger, aka the blockchain. This would facilitate the thousands and eventually millions of transactions needed to disrupt payment giants like VISA.

The implications for this are vast because at the point where Bitcoin can do everything VISA can, VISA becomes Blockbuster, and we all know how they ended up. Now that Segwit is locked-in, lightning will soon follow. Another coin that has Segwit, and will soon have lightning is Litecoin, something I still believe to be undervalued and a good long term investment.

If you would like further reading on the subject, these are two things I found useful in helping my understanding of Lightning Network:

So you wanna be a crypto superstar? Live large? Race fancy cars and go to mars. This is my case to take steps and acquire some Litecoin right meow.

There are 2 simple reasons for this, and for the timing.

1: Litecoin trades at ~$49USD with a total supply of 84,000,000 or 4x Bitcoin(21,000,000). Litecoin has Segwit already and that will allow for more dank protocol upgrades soon.

2: Bitcoin is about to undergo some intense shit in the next 2-5 months and Litecoin could be a brilliant hedge in that regard. The current ratio is currently 0.01954 but I see no reason by in time it should not get closer to 0.25BTC.

You can purchase Litecoins on one of the exchanges I listed here(Kraken, Coinbase, Bittrex, Bitstamp, Bitfinex)

The Lighthouse of Alexandria was one of the 7 wonders of the ancient world, a single light to guide the way. Today what remains are only stories and pictures passed down through time. There is a story of a Eunuch sent to Alexandria by the Byzantines written by al-Mas’udi. The Eunuch gained the confidence of the Caliph and convinced him there was treasure under the Lighthouse and to allow him to search for it. ‘The search was cunningly made in such a manner that the foundations were undermined, and the Pharos collapsed.’ Bitcoin is bigger than 1 man, but it is important to remember that bad actors exist, we are just lucky that Bitcoin’s transparent nature brings them to light sooner rather than later.

Every once in a while there is a serious bought of FUD(Fear, Uncertainty, Doubt) in the bitcoin space, whether or not it is serious really isn’t that important. The market cycle makes sure there is always some news correlation to price movements, or vice versa. Right now, in Bitcoin, we are just coming down from new ALL TIME HIGHS and eventually the market has to correct. I believe this may be beginning to happen now. Bitmain Tech, Jihan Wu, the largest producers of ASICS have been utilizing something call ASICBOOST, which as the name implies, boosts your bitcoin mining profits. Greed is now showing itself in the attempts to co-opt or create a new centralized bitcoin. Currently we have #chinacoin, #bitmaincoin #suckitjihan. The proposal: https://blog.bitmain.com/en/uahf-contingency-plan-uasf-bip148/ is a User Activated Hard Fork, actually a Miner Activated Hard Fork, which is a contingency plan against BIP 148, a User Activated Soft Fork, that would signal the adoption of Segwit and necessary protocol upgrades. The UAHF is an attempt to get bitcoin into an onchain scaling course, effectively giving Bitmain, with its mining resources, total control over Bitcoin development. However, if the UAHF is activated it will be a shitcoin, not Bitcoin. The reception to the proposal is poor to say the least, and it already looks like the UAHF/MAHF is dead in the water. I still think there will be a few weeks to months of FUD surrounding the issue as many headlines are pumped to confuse or muddle information. Most respected people in the ecosystem have already made their opinions clear, and I have assurances that it is already settled that Segwit will be activated through BIP 141 once/if BIP 148 (MAHF) fails.

I recently found out that both Poloniex and Bittrex, the two major Altcoin exchanges, had ATH (all time high) new users today. This is a pretty clear signal that there is a LOT of new interest and money coming into the crypto space in general. Because of that I thought it would be prudent to advise that if you too are just getting your foot in the door you should follow some simple and proven strategies to avoid becoming what is known as a bagholder, or someone who bought the top from someone who bought the bottom.

I should know, I paid >$900USD for my first bitcoin and then watched as it went all the way to sub $200. It is likely that you will experience a similar fate if you do not take some simple steps and DOLLAR COST AVERAGE. Simply put, spread your buying out over time so that you don’t go all in at the top and likely will buy some cheaper coins. This is a wonderfully clear and concise post on the subject that I recommend you read through and practice.

Don’t get me wrong, I certainly believe that bitcoin and cryptocurrencies are the future but markets can become irrational and you want to try to avoid buying into a frenzy. This is all too common, and something I learned the hard way.

Notice how this chart doesn’t have any asset attached to it, that’s because human psychology plays out the same way in any market. So, when in the market, act accordingly. Patience is a virtue

Peer-to-Peer (P2P): Peer-to-peer (P2P) computing or networking is a distributed application architecture that partitions tasks or workloads between peers. Peers are equally privileged, equipotent participants in the application. They are said to form a peer-to-peer network of nodes.

Decentralization: Decentralization is the process of redistributing or dispersing functions, powers, people or things away from a central location or authority.

Hashing: A hash function is any function that can be used to map data of arbitrary size to data of fixed size. The values returned by a hash function are called hash values, hash codes, digests, or simply hashes.

When money transfers occur as a bank wire transfer or ACH payment, or even transfers of money using services such as PayPal, the funds are sent electronically but the currency transmitted is representative money and what transfers is an underlying fiat currency.

Cryptography: Cryptography or cryptology is the practice and study of techniques for secure communication in the presence of third parties called adversaries.

Public Key Cryptography: Public key cryptography, or asymmetric cryptography, is any cryptographic system that uses pairs of keys: public keys which may be disseminated widely, and private keys which are known only to the owner. This accomplishes two functions: authentication, which is when the public key is used to verify that a holder of the paired private key sent the message, and encryption, whereby only the holder of the paired private key can decrypt the message encrypted with the public key.

Encryption: In cryptography, encryption is the process of encoding a message or information in such a way that only authorized parties can access it. Encryption does not of itself prevent interference, but denies the intelligible content to a would-be interceptor. In an encryption scheme, the intended information or message, referred to as plaintext, is encrypted using an encryption algorithm, generating ciphertext that can only be read if decrypted.

Algorithm: In mathematics and computer science, an algorithm is a self-contained sequence of actions to be performed. Algorithms can perform calculation, data processing and automated reasoning tasks.

Wallet: A digital wallet refers to an electronic device that allows an individual to make electronic transactions. This can include purchasing items on-line with a computer or using a smartphone to purchase something at a store.

Cold Storage: Cold storage in the context of Bitcoin refers to keeping a reserve of Bitcoins offline. This is often a necessary security precaution, especially dealing with large amounts of Bitcoin.

Hardware Wallet: A hardware wallet is a special type of bitcoin wallet which stores the user’s private keys in a secure hardware device.

They have major advantages over standard software wallets:

private keys are often stored in a protected area of a microcontroller, and cannot be transferred out of the device in plaintext
immune to computer viruses that steal from software wallets
can be used securely and interactively, as opposed to a paper wallet which must be imported to software at some point
much of the time, the software is open source, allowing a user to validate the entire operation of the device

Paper Wallet: In the most specific sense, a paper wallet is a document containing all of the data necessary to generate any number of Bitcoin private keys, forming a wallet of keys. However, people often use the term to mean any way of storing bitcoins offline as a physical document.Mining: Mining is the process of adding transaction records to Bitcoin’s public ledger of past transactions. This ledger of past transactions is called the block chain as it is a chain of blocks. The block chain serves to confirm transactions to the rest of the network as having taken place. Bitcoin nodes use the block chain to distinguish legitimate Bitcoin transactions from attempts to re-spend coins that have already been spent elsewhere.

Getting Started with Bitcoin
Bitcoin is the first decentralized peer-to-peer network for transmitting value across the internet. It uses something called a Blockchain that records and maintains a record of the transactions in order to keep an immutable record of bitcoin transactions. Bitcoins are the unit of account on the blockchain and act as a currency like cash on the internet. Bitcoin is the first crypto currency but not the only, there are >500 currently and that is growing. Generally each crypto currency has is own blockchain however some currencies/tokens are built on top of other blockchains, like Counterparty for instance.

Getting your first Bitcoins
There are many ways to acquire bitcoins. Here is a list ranging from simplest to more complicated:
1.Bitcoin ATM (use coinatmradar.com)
2.Bitcoin Exchange (see buy/sell)
3.Localbitcoins (In person exchange)
4.Earn for goods/services
5.Bitcoin Faucets(generally small payouts)

Storing Bitcoins/Spending
In order to store your bitcoins you will need a wallet. I recommend Mycelium for mobile and Electrum for PC/Laptop. IMPORTANT: When you first create your wallet it is essential that you write down on paper your mnemonic/seed. I cannot stress enough how important this is because if you lose your phone or laptop then this will be the only way to recover your bitcoins. The mnemonic/seed is a representation of your private key and gives you control of the bitcoins at your public key(s). (If this is seeming complicated try watching some of the videos at the bottom of this post) The bitcoinwiki is a great resource as well as bitcoin.org for more information on these fundamentals.

Once you have created your first wallet you will need to find your public key, generally found under the receive tab. It will look like a string of numbers and letters and probably be accompanied by a qr code which is a representation of that public key. To receive bitcoins you will need to send that to the person paying you or to the exchange you are withdrawing from.

To spend bitcoins or to send them, you will need to find the public key for the person/place/thing you are sending to. Simply copy and paste that into the send field or scan the qr code with your device.

You can also purchase a bitcoin debit card if you want to spend your bitcoin at merchants that don’t yet accept it. For a list of cards see Resources

I highly recommend purchasing a cold storage device to keep your bitcoins secure from hackers, loss of devices, theft or other catastrophic situations. You can buy one here: mytrezor.com. Otherwise you can store your bitcoins on paper wallets or use another method(more complex). Paper wallets or a cold storage device is adequate.

As a general rule of thumb if you do not control your private key aka have your bitcoins on a device or wallet you control, you do not have your bitcoins.

Miner Fees/I thought bitcoin was free!!
Miners fees are attached to transactions that you are sending and are paid to the miners/computer who secure the bitcoin blockchain. They are generally very small however currently with the growth of bitcoin they are higher because of the amount of people using the network. They act as the economic incentive to relay and secure bitcoin transactions and therefore miners will process transactions with higher fees first. Most wallets will calculate the fees for you but you can adjust that calculation in order to ensure quick confirmations. The miners fee is paid once per transaction and does not limit the amount of value you send ie: it costs the same to send $5 as it does to send $5million. It is free to receive bitcoins.

General Rules of Thumbs

If you do not control your private keys you do not control your bitcoins. Use cold storage to avoid this.

Always encrypt your wallets with secure passwords.
Keep only what you need on your mobile or computer, the majority of your bitcoin should be kept in cold storage. Syphon off what you need to only when you need it. Aka send some bitcoin to your wallet on your phone of other method for spending

Do not tell people how many bitcoins you have EVER, they are likely to be highly valuable in the future and you should not take unnecessary risks.

Use different passwords for each exchange/wallet in order to increase security.

If you are unsure of something don’t hesitate to ask the community, it is generally friendly. However beware of trolls as there are many.

Videos:

What is Bitcoin?

I will continue to update this document to keep it as up to date as possible. If you find errors or fallacies please do not hesitate to comment and inform me. To the best of my knowledge this guide should empower you to get a basic grasp of bitcoin.

You can always reach me on telegram: @therealninza but please keep the questions concise and don’t troll too hard.